By Bernie Woodall
DETROIT Nov 21 Detroit plans to put workers on
unpaid leave starting Jan. 1 to prevent the city from running
out of money if the city council continues to balk at reform
measures and the state of Michigan blocks the release of
The furloughs and other cost-cutting measures outlined by
Mayor Dave Bing and top city officials on Wednesday are meant to
offset $30 million that Michigan is withholding from the city
unless certain conditions are met.
"These actions are necessary to keep the city from falling
into further financial distress," Bing told reporters.
While the mayor said public safety services would not be
adversely affected, details on the furloughs were not available.
The nine-member city council has resisted some of the
measures aimed at restoring Detroit's fiscal health sought by
the state and agreed to by Bing. Earlier this year, the city
reached a consent agreement with Michigan that gave the state
some oversight and allowed the mayor to disregard collective
bargaining agreements. But the city has been criticized by state
officials for slow progress on its financial reforms.
On Tuesday, the city council rejected one of the conditions
for the state's transfer of an initial $10 million - the
proposed hiring of law firm Miller Canfield Paddock & Stone to
help with legal issues related to the financial stability deal
with the state. That raised the risk of Detroit running out of
money by the end of the year.
Projections presented this month by city officials to an
oversight board in charge of Detroit's finances showed the
city's weekly cash flow at just $4.1 million in mid-December and
on course to drop to a negative $4.8 million a week at the end
of the year.
Jack Martin, Detroit's chief financial officer, said that
scenario will not happen.
"The mayor, the administration is planning to implement
additional cuts to ensure that the city won't run out of money,"
Officials also said the city would not miss any payments on
outstanding debt. A cash-flow crisis earlier this year led
Detroit to warn it could default on some bonds. That was averted
by the sale of new debt that raised $137 million for the city.
While Michigan has released some of that money to Detroit, $30
million was tied to specific conditions for the release of $10
million this week and $20 million on Dec. 14.
The council rejected the Miller Canfield contract, but has
approved two other requirements set by the state - deals with
Ernst & Young for a cash-flow analysis and with consulting and
actuarial firm Milliman to work on the city's pensions.
City County President Charles Pugh said on Tuesday a
different law firm might be acceptable to council members
A city official said it would take another law firm hundreds
of hours to catch up with the work done already by Miller
Bing, who defended his right to choose a law firm, said he
was open minded about tweaking his requests to the city council,
but noted that "the state is holding the cards at this
Detroit has been hit by a sharp fall in population and tax
revenue, which helped trigger Michigan's intervention to get its
largest city back on good financial footing.